Fuel analyst Dan McTeague delves into the dynamics behind the current high gasoline prices and explains why they are anticipated to persist until the winter months.
Gasoline prices are poised to reach their yearly peak this summer and continue their ascent into fall across Canada, attributed to a multitude of contributing factors, according to experts.
Recent weeks have already witnessed a noticeable uptick in pump prices across various regions, causing Canadians to feel the financial strain.
The Canadian Automobile Association (CAA) reports that, as of August 16, the national average gasoline price is 169.3 cents per litre, marking an increase from the previous week’s average of 163.9 cents per litre.
GasBuddy, a reliable gas price indicator, reveals that British Columbia has the highest recorded gas price at 192.8 cents per litre, followed by Nova Scotia at 186.3 cents per litre and Prince Edward Island at 186 cents per litre.
Though some stations in Yukon display elevated prices around 193 cents per litre, this is not a reflective average for the territory as a whole, unlike data from other regions.
Conversely, the lowest gas prices as of August 16, according to GasBuddy, are seen in Alberta at 146.4 cents per litre, the Northwest Territories at 159.3 cents per litre, and Saskatchewan at 161.3 cents per litre.
Gasoline costs have experienced a consistent rise over the past few months.
Statistics Canada’s July Consumer Price Index (CPI) report attributes a considerable portion of the overall increase in inflation to gasoline. The headline inflation rate surged from 2.8% in June to 3.3% in July.
“Excluding gasoline, the CPI rose 4.1%, edging up from 4.0% in June,” states the CPI report released on Tuesday.
Michael Manjuris, professor and chair of Global Management Studies at Toronto Metropolitan University, elucidates that adverse weather conditions and supply shortages are key factors behind the escalating gas prices.
A pivotal contributor is the recent decision by the Organization of the Petroleum Exporting Countries (OPEC), responsible for governing crude oil supply on a global scale. OPEC reduced daily crude oil output by 1 million barrels in June 2023. This cut, which is set to be implemented in other nations in the coming months, has triggered cost increases.
Manjuris underscores the significance of this reduction, noting that if demand remains constant while supply dwindles, prices will inevitably rise.
Moreover, the availability of storage for refined petroleum products has emerged as a concern. Any major weather event affecting refining regions, such as Texas, California, or Canada, can disrupt supply.
Manjuris points out that when such weather events occur, refineries can suffer significant damage that takes months to repair, leading to a reduction in supply. He further cites instances where heatwaves can cause technology malfunctions, necessitating capacity reduction or even shutdowns.
As for future projections, Manjuris anticipates that while certain weather-related factors may ease in the upcoming months, gas prices will continue to remain elevated. He predicts prices close to $2 per litre in southern Ontario and across Canada in the coming months.
The cost of petroleum summer blends, which is higher than winter blends, is one contributing reason why gas prices generally decrease heading into winter. As a result, Manjuris suggests that prices are likely to recede to some extent by the winter season.